Friday, November 18, 2011

RAM Ratings reaffirms ratings on New Pantai Expressway's RM740m debt notes

KUALA LUMPUR (Nov 18): RAM Rating Services Bhd has reaffirmed the ratings of the debt notes totaling RM740 million issued by New Pantai Expressway Sdn Bhd (NPESB).

The ratings agency said on Friday it had reaffirmed the respective AA3 and AA3(s) ratings of the company's RM490 million senior Bai' Bithaman Ajil notes (2003/2014) and RM250 million junior Bai' Bithaman Ajil notes (2003/2016) (junior notes).

It said that both the long-term ratings have a stable outlook.

To recap, NPESB holds the concession for the CONSTRUCTION [], maintenance and toll collections of the 19.6-km New Pantai Highway.

RAM Ratings said the rating of the senior notes remains supported by strong debt-coverage levels and the sustainable traffic-volume growth of the highway, backed by established townships.

In the financial year ended March 2011, average daily traffic (ADT) on the highway rose 9.2% on-year to 141,290 vehicles, buoyed by robust traffic flows at all three toll plazas - Pantai Dalam, PJS 2 and PJS 5. The positive momentum extended into 1Q FY March 2012, when ADT went up 8.8% on-year to 153,756 vehicles.

'Moving forward, NPESB is expected to maintain its robust debt-coverage levels, with projected minimum and average senior finance service coverage ratios (FSCRs) of 2.00 times and 2.11 times (with cash balances, post-distribution), respectively, on payment dates,' it said.

RAM Ratings said the enhanced rating of the junior notes reflected the strength of the corporate guarantee from its parent IJM CORPORATION BHD [] under the payment guarantee that unconditionally and irrevocably guarantees the junior notes.

The ratings agency added that as the corporate guarantee is only applicable while the senior notes are still outstanding, the rating of the junior notes will revert to the stand-alone rating upon full redemption of the senior notes on Oct 31, 2014.

RAM Ratings noted that after the full redemption of the senior notes, NPESB's buffer is expected to weaken when servicing the principal repayment on the junior notes, with Junior FSCRs (with cash balances, post-distribution) on payment dates of 1.35 times (fiscal 2016) and 1.27 times (fiscal 2017) due to its lumpy debt repayment of about RM120 million per annum.

'Given NPESB's weaker debt coverage compared to its AA3-rated peers, we highlight that the company's ability to redeem the junior notes will be weakened if it decides to make distributions to its shareholder,' it said.

RAM Ratings said the junior notes' credit metrics of the Junior Notes could improve if the highway's future traffic performance is above expectations.

'Similar to other toll-road concessionaires, however, NPESB is also exposed to regulatory and single-project risks,' it said.


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